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As Donald Trump prepares for a return to the presidency, world economies are bracing for significant changes. From new trade tariffs to shifts in climate-related policies, Trump’s leadership could spark seismic changes in international markets and trade dynamics. This lesson delves into how global financial markets, businesses, and governments are preparing for a new wave of “Trumponomics,” exploring the potential impacts on trade, inflation, and climate policy.

How are world economies reacting to Trump’s imminent return as U.S. president?

Warm-Up Question:  How do you think changes in trade policies, like tariffs, impact everyday consumers and businesses?

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JUANA SUMMERS, HOST:

Donald Trump’s election victory has inspired a series of significant moves in financial markets around the world. As Willem Marx reports, investors are racing to realign themselves for a new administration that may propel seismic changes in America’s trade policy with global implications.

DONALD TRUMP: To me, the most beautiful word in the dictionary is tariff.

WILLEM MARX, BYLINE: A new U.S. administration will often pursue fresh ideas on tax, spending and trade that affect companies and consumers alike. One thing global financial markets dislike is unpredictability, but that’s something they should now expect, says Sebastien Jean, an economist at the French Institute for International Relations.

SEBASTIEN JEAN: Trump’s presidency will open an era of increased uncertainty, and that’s always pretty bad for trade.

MARX: But based on Donald Trump’s last time in the White House, as well as his campaign pronouncements, many economists say there are some actions that investors are already anticipating. Products imported to the U.S. from overseas could face tariffs ranging anywhere 10 to 60%, which could disrupt international trade but also affect ordinary Americans, too, Jean says.

JEAN: If tariffs are applied across the board, this will have implications for consumers, and these implications would be increased prices.

MARX: Some experts estimate this could cost $2,600 per household, and higher prices could, in turn, mean higher inflation – something Trump said he’ll end. Tariffs during his last presidency on steel imported from China failed to stimulate fresh steel production in the U.S., as then-President Trump promised people it would. Steel supplies were simply sourced from elsewhere instead. But reintroducing another trade war with China brings with it wider risks, too, says Francesca Ghiretti, a European economic security expert at the Rand think tank.

FRANCESCA GHIRETTI: You can start an escalation of tariffs and retaliation. And in a period where growth is already complicated, this can be very costly for the U.S. economy but also for the global economy.

MARX: One other economic casualty of a Trump administration could be climate-related investment.

ULRIKE MALMENDIER: There will be less push for financing means to combat climate change.

MARX: Ulrike Malmendier is an economist at Berkeley.

MALMENDIER: And that is really bad news for the world because the U.S. is a big part of the global economy. And not having them push alongside with other countries will make it extremely difficult to make progress.

MARX: That may also mean major price moves for metals and other commodities, like oil and gas. Meanwhile, the prospect of tax cuts and looser restrictions on regulation is helping drive positive reactions for some stocks. But there will be winners and losers in the corporate world, says Steve Woolcock of LSE Consulting, with companies reliant on global supply chains the worst-hit.

STEVE WOOLCOCK: Increased tariffs by the U.S., which would probably lead to retaliation by other major trading powers, would disrupt those existing supply chains, which leads to uncertainty, increased costs and therefore has a knock-on effect on companies, not to mention the knock-on effects on trade and growth and therefore employment as a whole.

MARX: With Trumponomics 2.0 now just 10 weeks away, investors, executives and foreign leaders will be watching what the next president chooses to do very closely. For NPR News, I’m Willem Marx in London.

Vocabulary and Phrases:

1. Seismic change: A major or dramatic transformation.
2. Tariff: A tax or duty placed on imported or exported goods.
3. Pronouncements: Formal or authoritative statements or announcements.
4. Across the board: Affecting everyone or everything in a group.
5. Implications: Possible effects or consequences of an action or decision.
6. Think tank: An organization that conducts research and engages in advocacy in various areas such as social policy, political strategy, economics, and more.
7. Escalation: An increase in intensity or magnitude, often referring to conflicts or situations.
8. Retaliation: An action taken to return harm for harm, often used in the context of trade or conflict.
9. Casualty of: Something or someone that suffers as a result of a particular event or action.
10. Knock-on effect: An indirect result or consequence of an action.
11. Trumponomics: Economic policies associated with Donald Trump, often focusing on tariffs, tax cuts, and deregulation.

Comprehension Questions:

1. What economic seismic change does the report suggest could occur with a Trump presidency?
2. How might tariffs affect American consumers according to Sebastien Jean?
3. What is the potential knock-on effect of escalating a trade war with China?
4. How does Ulrike Malmendier view the impact of climate-related investments under a Trump administration?
5. What implications do pronouncements made by Trump have for global financial markets?

Discussion Questions

1. Do you think tariffs help or hurt a country’s economy in the long run? Why?
2. Why might global supply chains be particularly affected by changes in trade policies?
3. What do you think are the implications of reducing climate-related investments?
4. How do you feel about retaliation in international trade disputes? Is it ever effective?
5. Can economic policies, like those associated with Trumponomics, lead to long-term benefits for a country’s economy? Why or why not?